The offer is conditional on obtaining more than 50.01% of Sabadell's equity, the approval of the capital increase by the BBVA shareholders, and the approval of the National Markets and Competition Commission (CNMC) and the UK Prudential Regulation Authority.
The BBVA board of directors launched a hostile takeover bid for 100% of Banco Sabadell after the latter rejected a friendly proposal, according to the statement sent this Thursday to the Commission National Securities Market (CNMV).
BBVA offers Sabadell shareholders an exchange of one new share for every 4.83 of Sabadell. This was the same offer proposed last week to the board of directors of the Catalan entity and it represents a premium of 30% over the closing price of both entities on April 29, 42% on the weighted average prices of the last month, and 50% on the weighted average of the last three months.
In addition, Banco Sabadell shareholders will have a 16% stake in the resulting entity. The equivalent price of the cash consideration is 2.12 euros per share of Sabadell. BBVA plans to submit the request for authorization of the takeover bid to the CNMV, along with a justification and other complementary documents. This needs to be done during "the first half" of a maximum period of one month from the date the offer was made public.
The BBVA board also agreed to call its general meeting of shareholders to decide on the issuance of new shares in the amount necessary to fully cover the exchange.
The offer is conditional on obtaining more than 50.01% of Sabadell's capital, the approval of the capital increase by the BBVA shareholders meeting, and the approval of the National Markets and Competition Commission (CNMC) and the UK Prudential Regulation Authority.
BBVA expects that the closing of the operation will take place in a period of between six to eight months, once it receives the necessary authorizations. JP Morgan, UBS Europe, Rothschild&Co, Garrigues and DWP are advising the bank.
"EXTRAORDINARILY ATTRACTIVE" OFFER
"We present Banco Sabadell shareholders with an extraordinarily attractive offer to create an entity with greater scale in one of our most important markets," said the president of BBVA, Carlos Torres Vila. "Together, we will have a greater positive impact in the territories in which we operate, with an additional credit granting capacity of 5 billion euros per year in Spain," he added.
The bank believes that the merger would have "very positive" financial impacts thanks to "relevant synergies" and the "complementarity and excellence" of both entities. After the closing of the operation, BBVA would be the second financial entity in Spain - behind CaixaBank -, which is one of the group's most relevant markets and whose future prospects are "good." BBVA's profitability in Spain at the end of December 2023 was 19%.
Based on data at the end of 2023, the resulting entity would reach a loan portfolio of 265 billion euros and a market share in loans close to 22% in the Spanish market (13.8% BBVA and 8.1%
Sabadell Bank).
"They are two very complementary banks, both due to their geographical diversification and their strengths in customer segments. In Spain, Banco Sabadell is a leader in SMEs, with a share of 12.7%, versus 11.5% for BBVA, while BBVA is stronger in retail banking, with a share of 14.7%, compared to 6.3% for Banco Sabadell," says the entity chaired by Carlos Torres.
'PAY-OUT' OF BETWEEN 40% AND 50%
BBVA also anticipates that it will maintain its current shareholder remuneration policy, with a 'pay out' of between 40% and 50%, combining cash dividends and buybacks, and its commitment to distribute any excess capital above 12%.
In tandem, the entity maintains that the deal represents a "clear generation of value" for BBVA shareholders too. They further elaborate that the transaction will be positive for earnings per share (EPS) "from the first year" after the subsequent merger of both entities, with an improvement of around 3.5%, once the savings associated with the merger are generated (estimated at about 850 million euros before taxes). Additionally, the tangible book value per share increases around 1% on the date of the merger.
Furthermore, BBVA states that the transaction will mean a "high return on investment", with an incremental ROIC close to 20% for BBVA shareholders. It would have a "limited" impact on the CET1 capital ratio, of approximately 30 basis points, which would be around 1.45 billion euros for restructuring expenses, not including the impact of the breakdown of joint venture agreements.
INTEREST GROUPS
With respect to other interest groups, BBVA points out that clients would have a "unique" value proposition due to the complementarity of the franchises, the greater product offering and the bank's global reach, while employees could take advantage of "new professional opportunities" by being able to grow in a global entity.
In this sense, BBVA's intention is to "preserve the best talent" of both entities and that all decisions to integrate employees are guided by principles of "professional competence and merit, without adopting traumatic measures and with all guarantees." They also expect the technological integration to take 12 to 18 months.
The resulting entity would be "stronger and more profitable", which would translate, according to the bank, into more financing for companies and families and into a "greater contribution to public coffers via taxes."
"All interest groups will benefit from this operation," said BBVA CEO Onur Genç. "Banco Sabadell has done an excellent job, with admirable progress in recent years, and now its shareholders can join an entity with a combination of growth and profitability unparalleled in Europe," he added.
REACTION OF BANCO SABADELL
For its part, Banco Sabadell has reiterated their rejection to this hostile takeover. In a statement on Monday, Sabadell had ruled out the operation arguing that it "significantly undervalues" the Sabadell project and its growth prospects as an independent entity.
"The board has full confidence in Banco Sabadell's growth strategy and its financial objectives and is of the opinion that its strategy as an independent entity will generate greater value for its shareholders," highlighted the entity, whose highest governing body met on Monday to evaluate BBVA's (friendly) proposal, which they described as "unsolicited, indicative and conditional."
After analyzing the proposal "in detail" during Monday's council (which was also attended by Goldman Sachs and Morgan Stanley as financial advisors and Uría Menéndez Abogados as legal advisor), they concluded that BBVA's offer "does not satisfy" Sabadell's and its shareholders' interests and, therefore, rejected BBVA's proposal.
It is not the first time that both banks have this kind of operation on the table. Already in 2020, BBVA and Sabadell studied a merger, although they finally discarded it because they did not reach an agreement on the share exchange ratio.
